Productivity is computed through the comparison of total units of output within an economy to the total units of input within an economy. Productivity is considered an important measure of an economy's ability to expand. In the United States, productivity is measured by the Bureau of Labor Statistics. The principal measure of productivity is labor productivity, which measures the productivity of an economy's workers.

1. Identify the real output of the economy. This statistic is typically published by a governmental statistics bureau, and is known as gross domestic product. When comparing productivity across periods, be careful to use a real, or inflation-adjusted, measure of gross domestic product. Otherwise, your comparison will yield what appears to be productivity gains but in actuality are inflationary increases.

2. Identify the units of labor input into the economy during the same period for which you measured output in Step 1. It is important that the period used to measure labor inputs exactly matches the period of economic output. The unit of labor input most commonly used (and utilized by the BLS in the United States) is labor hours. This is the aggregate number of hours worked across the economy. This statistic is also commonly published by governmental statistical bureaus.

3. Divide the real output of the economy identified in Step 1 by the units of labor input identified in Step 2. The result will be expressed in terms of the labor input unit identified in Step 2. For example, if labor hours were used in Step 2, productivity will be measured in real output per labor hour.

Tip

Productivity may be computed for various industries or economic sectors. In each case, to compute the value, it is necessary to look at the real output of the industry or economic sector versus the labor inputs for the industry or economic sector. This information is often more difficult to compile since it is not always readily available from governmental statistical bureaus.

About the Author

Michael Dreiser started writing professionally in 2010. He is a certified public accountant with experience working for a large New York City accountancy and expertise in areas ranging from private equity taxation to investment management. He holds a Master of Business Administration in international finance from l’École Nationale des Ponts et Chaussées in Paris.